After a multi-week pullback, Canada’s telecommunications sector looks to be reaccelerating, says analyst Javed Mirza with Canaccord Genuity, who points to recent improvement in share prices for Telus Corp. (TSX:T) and Rogers Communication (TSX:RCI.B) as a harbinger of better days ahead.
In a technical comment to clients on Wednesday, Mirza recommends adding exposure to Telcos via Telus and Rogers.
After increasing in value over much of the back half of 2017, Canadian telecommunication stocks including Telus, Rogers and BCE have all been on a downward slope, starting in late November/early December. Shares of Telus hit an all-time high of $48.94 on November 27, only to drop down to $44.31 this past Monday. The same goes for Rogers, which made its new high of $70.08 on November 21 but fell back in the months since, reaching down to $55.63 on Monday. Ditto for BCE, which is down 11 per cent from early December.
But both Telus and Rogers are now showing better performance in relation to the so far sad-sack TSX Composite in 2018, which Mirza says is a technical positive supporting further upside.
“We are adding exposure to Telco’s via Telus Corp. and Rogers Communication Inc.,” says Mirza. “We like the traditionally ‘defensive’ aspects of the Telco’s space during this period of high volatility. T and RCI.B are both reaccelerating in terms of relative performance versus the TSX Composite and price, while volume and On-Balance-Volume remains supportive of a push higher,” he says.
Mirza points to Canaccord’s most recent reports on Telus and Rogers from analyst Aravinda Galappatthige, who on February 8 maintained his “Buy” rating for Telus and one-year target price of $49.00 and on January 25 maintained his “Buy” rating for Rogers with a one-year target of $71.00.